AMERICA’S WAR AGAINST Germany went worldwide a year and a half before Pearl Harbor. The FBI became America’s first real foreign intelligence service. Many of its battles stayed secret through the end of the century.
The FBI’s attack against Nazi spies began in May 1940 with a Morse code message, sent by shortwave radio from a wood-frame bungalow on the beach in Centerport, New York, a little town on Long Island. It vaulted over the Atlantic Ocean and landed in the Hamburg office of the Abwehr, the German military intelligence service.
The Abwehr responded with a steady stream of commands for secret intelligence from German agents in America. The Abwehr wanted reports on American military readiness, troop training, aircraft production, deliveries of warplanes to Britain, the construction of aircraft carriers, chemical-warfare manuals, machine tool factories, bombsights, and the movements of ships at sea. It radioed instructions to a ring of thirty-three agents. Some worked for companies like Westinghouse Electric, Ford, and Chrysler; others served on ships that plied the Atlantic.
The Abwehr thought the radioman receiving its orders at the Long Island bungalow and reporting reams of intelligence back to Hamburg was a forty-year-old naturalized American citizen, William Sebold.
But the FBI, not Sebold, was at the controls.
Sebold was a German army veteran of World War I, a drifting merchant seaman and aircraft mechanic who had lived and worked in New York and San Diego, and then returned to Germany at the start of 1939. Armed with a new American passport, orders from the Abwehr, and $500 in cash, he had been sent back to New York. He delivered himself to the FBI on February 8, 1940, after disembarking at the end of a trip from Italy on the SS Washington. He said that upon his return to Germany he had been coerced by German intelligence, which had shanghaied him into a spy school in Hamburg, where he had been trained in code making and secret communications.
FBI agents watched as Sebold took off his wristwatch, opened the back, and withdrew five tiny photographs. Read under a microscope, the documents contained the Abwehr’s demands for information on American military secrets including antiaircraft gunnery, chemical warfare, and troop movements.
The Abwehr had ordered Sebold to contact a man named Herman Lang and construct a clandestine shortwave radio base to communicate with German intelligence in Hamburg. The identification of Lang convinced the FBI beyond all doubt: he was an inspector at the factory that made the Norden bombsight, one of the closely guarded secrets of American military technology.
Hoover sent this startling information to President Roosevelt on February 12, 1940, four days after Sebold arrived in New York.
The question for the FBI was how to use Sebold to double-cross the Germans and roll up their spy network in the United States. Hoover and his men had no experience in the use of double agents. A successful double-agent operation is a con game, based on deception. Sebold had to look like he was working for the Abwehr while he was working for the FBI.
The radio was the key. When the clandestine station at Centerport went on the air, on May 19, 1940, an FBI agent named Morris Price was at the controls, not Sebold.
Over thirteen months Price would transmit 302 messages to the Abwehr and receive 167 replies. Coordinating with army and navy intelligence, the FBI sent information, misinformation, and disinformation to Germany. The Abwehr replied with a steady list of orders for its agents and demands for information. Hoover reported regularly to the White House on what the Germans wanted from their spies in the United States—chiefly information on America’s war potential and its shipments of military materiel to En gland.
The Abwehr’s officers played into America’s hands. They radioed orders to Sebold to open a bank account in New York and to serve as a paymaster for the spy ring. This gave him control over the ring’s operations and ready access to its thirty-three agents.
The FBI set up a sting operation built around a dummy company, wiretaps, and hidden cameras—financed in part by the unwitting Abwehr and underwritten by President Roosevelt’s close friend Vincent Astor.
Astor already was working as a spy for FDR. An heir to one of America’s great fortunes, Astor had won a commission from the president to coordinate intelligence operations in New York. In his capacity as director of Western Union, he organized the interception of international cable traffic, in violation of federal law. In Bermuda, where he owned a vast estate, Astor ran an equally illegal operation with British intelligence, opening diplomatic pouches and international mail carried on ships and airplanes stopping on the island en route to and from the United States. In New York, at the West 42nd Street headquarters of Newsweek, the magazine Astor owned and operated, he gave a suite of three sixth-floor offices to the FBI.
The Newsweek building became the headquarters of the Diesel Research Corporation, run by William Sebold, financed by $5,000 checks sent to New York by Abwehr agents in Mexico, and wired with hidden microphones and cameras by the FBI. Sebold used the offices to pay the members of the ring and receive their reports. Couriers delivered messages to Sebold that showed the movements and the whereabouts of every valued member of the ring.
The FBI recorded eighty-one meetings between Sebold and the Abwehr’s agents at Diesel Research, with moving pictures and still photographs shot through a trick mirror, and with hundreds of reels of audiotape recorded with hidden microphones. Within the year, the FBI had arrested them all.
Successes in counterintelligence were rarely as smashing as the Sebold case. The investigation opened Hoover’s eyes to the power of deception in warfare.
The FBI’s shortwave radio communiqués with the Abwehr also began providing clues that the Germans were running spies in Mexico, Brazil, and Peru. Hoover used that information to create a new global intelligence operation.
Hoover’s crucial ally was Adolf A. Berle, a tough-minded assistant secretary of state. Berle ran the intelligence side of American diplomatic affairs; he served as State’s liaison to the FBI, the army, and the navy; before that, he had held the Latin America portfolio. He was one of the brainiest members of FDR’s brain trust. And though he was a high-minded Harvard liberal, the kind of man Hoover loved to hate, Berle won Hoover’s trust as well. They shared the quality of the clandestine mind.
In May 1940—as France fell to the Nazis, the British faced attack, and the newly installed prime minister, Winston Churchill, reached out for American help—Hoover and Berle talked about setting up a worldwide American intelligence agency. The Atlantic coasts of the Americas were rife with U-boats; five months before, German and British ships had battled in the mouth of the Río de la Plata in Uruguay.
Berle proposed that the FBI investigate Nazi spies from Havana down to Rio de Janeiro. The FBI already had sent one special agent down to Mexico City, where he had started working with the chief of police and the Interior Ministry to find German spies and subversives, and another to Rio, where he was training the Brazilian secret police.
Hoover and Berle brought in Brigadier General Sherman Miles, the chief of army intelligence, and Rear Admiral Walter Anderson, head of navy intelligence. Hoover and the military men had been squabbling over their responsibilities and authorities. Their coordination was scattershot, their sharing of secrets scant. General Miles and Hoover particularly detested one another. The army and the navy fought one another on principle. But, prompted by Hoover, they all brought the question of worldwide intelligence back to the president. It was already on his mind.
On May 26, 1940, in one of his fireside chats, the radio addresses that were heard by tens of millions of Americans, FDR had let his thinking show.
“Today’s threat to our national security is not a matter of military weapons alone,” the president told the American people. “We know of other methods, new methods of attack.
“The Trojan Horse. The Fifth Column that betrays a nation unprepared for treachery.
“Spies, saboteurs and traitors are the actors in this new strategy. With all of these we must and will deal vigorously.”
On June 3, 1940, Berle went to Hoover’s office at FBI headquarters. They had “a long meeting on coordinated intelligence,” and they agreed, as Berle wrote in his diary, “that the time had come when we would have to consider setting up a secret intelligence service—which I suppose every great foreign office in the world has, but we have never touched.” Eight days later they approved a plan, hastily drawn up by their lieutenants, to create something without precedent in the history of the United States.
The FBI would operate a spy agency under the deepest cover. Its existence would not be acknowledged. To an outsider, it would look like a corporation based in New York with branch offices throughout the world. Its international representatives would stealthily gather information based on secret assignments sent from headquarters, without knowing who would read it back in the United States. It would be called the Special Intelligence Service.
Once again the president put nothing in writing. He told Berle on June 24, 1940, that the FBI was now responsible for foreign intelligence in the Western Hemisphere from the Texas border down to Tierra del Fuego. The army and the navy would carve up the rest of the world.
“The President said that he wished the field to be divided,” Berle reported. It was a fateful phrase. The juggler had dropped the ball.